Finance

Birdie Golf, Inc. has been in merger talks with Hybrid Golf Company for thepast six months. After several rounds of negotiations, the offer underdiscussion is a cash offer of $440 million for Hybrid Golf. Both companies haveniche markets in the golf club industry, and the companies believe a mergerwill result in significant savings in general and administrative expenses.

Bryce Bichon, the financial officer for Birdie, has been instrumental in the mergernegotiations. Bryce has prepared the following pro forma financial statementsfor Hybrid Golf assuming the merging takes place. The financial statementsinclude all synergistic benefits from the merger:

2010

2011

2012

2013

2014

Sales

$640,000,000

$720,000,000

$800,000,000

$900,000,000

$1,000,000,000

Production Cost

$449,000,000

$504,000,000

$560,000,000

$632,000,000

$705,000,000

Depreciation

$60,000,000

$64,000,000

$66,000,000

$66,000,000

$67,000,000

Other Expenses

$64,000,000

$72,000,000

$80,000,000

$90,000,000

$97,000,000

EBIT

$67,000,000

$80,000,000

$94,000,000

$112,000,000

$131,000,000

Interest

$15,200,000

$17,600,000

$19,200,000

$20,000,000

$21,600,000

Taxable Income

$51,800,000

$62,400,000

$74,800,000

$92,000,000

$109,400,000

Taxes (40%)

$20,720,000

$24,960,000

$29,920,000

$36,800,000

$43,760,000

Net Income

$31,080,000

$37,440,000

$44,880,000

$55,200,000

$65,640,000

Bryce is also aware that the Hybrid Golf Division will require investments eachyear for continuing operations, along with sources of financing. The followingtable outlines the required investments and sources of financing.

2010 2011 2012 2013 2014...